Pensions and Divorce: Secure Your Future

Did you know that retirement assets are not automatically split in a divorce? In reality, without a plan in place your finances are up in the air amid your divorce.

The Wiser Women’s Institute for a Secure Retirement (WISER), published a must-read document. This checklist helps women make smart, informed financial decisions when it comes to pensions and divorce. The most important takeaway? Don’t shortchange yourself during a very emotional time. Secure your future before the divorce is final so you don’t end up wishing things were different.

How to Secure Your Finances During a Divorce

Let’s explore some more tips and tricks for keeping your finances afloat during this major life change.

1. Don’t assume anything!

Most women think that their lawyers are familiar with the many federal and state laws that set the rules for pension-splitting. Surprisingly, many lawyers do not know and don’t take the time to find out everything.

Lawyers need to prepare an acceptable pension order that fully protects the wife’s interests, explain all of the rights and options in collecting a pension share, and follow up.  This includes ensuring that pension plan officials receive and approve the pension order promptly after a divorce is final.

Missing any of these points can result in a significant amount of lost benefits from what is often the largest asset in a divorce. One example of an attorney error is neglecting to negotiate to include a survivor benefit – if a husband dies at an early age, the widow will receive nothing from his pension benefit.

2. Check on your retirement plans

Benefits that may be treated as marital property include company pension and 401(k) plans, federal, state and local government employee retirement plans, military retirement and Individual Retirement Accounts, among others. A divorce court needs to issue a special court order, depending on the type of plan (private or governmental), requiring the retirement plan in very specific terms to give her a portion of her husband’s benefits. The most commonly used court order is called a Qualified Domestic Relations Order (QDRO).

By the way, this can be a costly process. Worth every penny though and fees can be negotiated as part of the divorce settlement.

3. Stay proactive

The most important takeaway is not to leave everything to your lawyer. Be proactive and be sure you get the answers you need before your divorce is final. Consult with a financial planner, preferably someone who has worked with divorcees.  A Clarity Wealth Development Financial Advisor is a great place to start!

Additional Resources

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Our advisors can help you plan out your finances through your divorce and beyond. Click here to schedule a consultation with Clarity Wealth today.